Ethanol mandates have led to an increase in the production of distillers dried grains
(DDGs), a co-product of ethanol production that is incorporated into livestock
rations. As with most competitive industries, there is some level of price risk in
handling DDGs, and there is no DDG futures contract available for managing
price risk. Commonly, DDGs are hedged using only corn futures. Our results
suggest that cross-hedge risk may be reduced by including soybean meal futures in
an encompassing cross-hedge strategy. Further, we also conclude soybean meal
futures currently may be slightly more effective at reducing risk than in the past.